February Numbers

Between January’s payroll tax increase (or reversion to the norm) and February’s increasingly hysterical headlines about Congress’s latest efforts to tank the economy, it’s no surprise that this month’s numbers suck. With less money in your pocket and a self-inflicted recession on the horizon, you’d have to be insane or rich to buy anything you don’t need.

And, of course, I only sell things you don’t need.

February:

Total income: -36.8%
Total COGS: -41.0%
Payroll: -44.3%

Marketing: -42%
Net Income (Profit): +69.9% (+$921)

Year to Date:

Total income: -25.0%
Total COGS: -34.7%
Payroll: -18.5%

Marketing: -31.5%
Net Income (Profit): +62.6% (+$1,189)

The bottom line looks swell because I have not yet paid my corporate registration ($456), my annual report fee ($109), my tax preparation fee, or my developer’s fee for last week’s version upgrade. Those expenses will wipe out my profit in March.

Thank the gods I stashed away money for everything but the software upgrade. 

Assuming Congress remains deadlocked on the sequester, March sales could worsen dramatically as the spending cuts start to bite, the stock market tanks, and furloughs and layoffs begin – at least, that’s the Obama administration line. Or nothing at all might happen if Americans have stopped paying attention to Washington’s crisis-of-the-month. It’s always some damned thing and us little people can’t do anything about it anyway, so who cares?

Guess we’ll find out a month from now. Either we’ll be circling the drain again or we won’t.

************

On Google’s advice I converted a couple of my ad campaigns to their new “enhanced” mode, which is supposed to let me adjust my bids for clicks on mobile devices. People shopping with smartphones seldom buy anything, they misread product descriptions, and they generate a lot of cryptic emails and (worst of all) phone calls. Those who do place orders usually fail to choose product options and then don’t answer my emails. Even though smartphones are a small and low-quality market segment, I don’t want to block them entirely, so reducing my bids is a good option -- and even better if I can shave a few bucks off my advertising costs.

When I tried to cut mobile bids by 50% in my main campaign the interface cryptically told me “Not available with this bid type.” Bidding is really complicated with at least half a dozen different options (focus on clicks, focus on conversions, target maximum cost per conversion, target average cost per conversion, and on and on). I never did manage to find the bid type that would let me reduce mobile, and I think I screwed up my results while trying. Yesterday I had triple the usual click traffic for the same daily spend, which would be great if anybody had bought anything.

May Flowers

May was already blooming nicely before a bulk order for Dove kites kicked it into overdrive. Just look at these rosy numbers:

May:

Total income: +30.5%
Total COGS: +22.1%
Payroll: -21%
Marketing: +2.1%
Net Income (Profit): +368.9%

 
Year to Date: 

Total income: +0.8%
Total COGS: +2.6%
Payroll: +2.3%
Marketing: +17.4%
Net Income (Profit): -98.2%

For the month, sales rose more than COGS did. That’s good. Marketing costs barely rose at all. That’s also good. I made up substantial ground on the bottom line. That’s very very good. The drop in payroll is just a calendar quirk. 
 
For the year, COGS is up more than sales; that’s bad. Payroll is also up; that’s bad for Curio City but good for me. My failed Facebook experiment accounts for most of the marketing overrun, and that overrun accounts for much of the bottom line deficit. That’s been whittled down to $660; a lot of money, yes, but still possible to make up. Quickbooks says the top line is a scant $195 ahead of LY; Excel reports a slightly rosier $450 edge.

Facebook's tumbling stock price reins in my compulsion to curse them for ruining my bottom line. I'm not the only one losing money on that company. Curio City will never be worth billions of dollars, but it will probably survive longer than Facebook will. 

*******************

For years I dreaded what would happen when Panther Vision lighted cap sales inevitably dropped off. That’s happening now. They’re still a major product line, but they’re no longer my only engine. Fortunately, bird kites and golf balls have soared enough to plug the gap. The seasonal nature of those lines worries me, but maybe the caps will come roaring back in the fall. And there’s always a chance that Switchables (which are going through another one of their dormant stages) will surge again, too.

Without seeing Panther’s sales numbers, I can’t tell if the decline in lighted caps is my problem or theirs. There are an awful lot of competitors selling them now; that would be my problem. At the same time, endless design changes have complicated the line so much that it’s become confusing to sell, let alone to shop; that would be Panther’s problem. You've got your basic 4-LED solid caps, your 4-LED camo caps with and without color accents, your 4-LED Runner's caps, your 6-LED caps (some of them with the old 4-2 arrangement and some with the new 3-3, some with green lights and some with red), your 2-LED promotional line (which I don't carry), and a new power switch being phased in across the lineup. I know that the marketplace compels manufacturers to constantly innovate, but life was easier and sales were better when all they made was the basic 2-LED cap in half a dozen colors.

E-Commerce for Dummies Part 2: The Buck Doesn't Stop Here

This is the second of three ideas for my online e-commerce “lecture” (about 700 words).

Curio City’s gross sales look like a decent living wage. Alas, I can only pocket a fraction of them; most of my revenue enriches other people. (Regular readers might recognize this topic from when I rejected becoming an Amazon seller.) So who got how much of every dollar that came in last year?

$0.495 buys the stock, including inbound freight and some other fiddly little things that constitute “Cost of Goods Sold”, or COGS. “Keystone” is the rule in retail, and it simply means doubling your cost: Paying more than 50% of retail is bad and paying less than 50% is good. Some things (like clothing) are marked up by as much as 400% to a benchmark price that only the ignorant and affluent ever really pay, then sold at semi-permanent discounts that still deliver bloated margins (the difference between cost and selling price). This deceptive pricing technique is so common that Massachusetts requires retailers to occasionally display clothing at its nominal retail price to justify calling it “regular price.” Other things (like books) deliver margins as low as 20%. Retailers can affect this cost by sourcing their merchandise and setting prices…but 50% is the general goal.

Rent would typically be a merchant's second-largest expense. As a home business, I only have to rent a UPS Store box and web server space, which fit comfortably into "miscellaneous". One could ascribe a percentage of our mortgage payment to a business expense – that is, if Curio City takes up 25% of our house, then 25% of our mortgage could be considered business rent. But for this discussion let’s just simplify “rent” to zero.

$0.20 goes into my pocket and another $0.032 goes to federal and state payroll taxes. If I had to offer basic employee benefits, payroll and associated expenses would rise to about 30 cents from each dollar.

Shipping costs would come next if shipping fees didn't cancel them out. Small shippers (fewer than 200,000 parcels a year; Curio City ships about 1,500) pay the same retail rates to UPS and USPS that you pay. Medium-sized shippers hire freight consolidators who pass along their volume discounts but charge their clients for warehousing and labor; ideally, the discounted postage plus service fees are roughly the same as small shippers pay to do it ourselves. The biggest players, of course, get very attractive bulk rates that enable them to offer free shipping. Anyway, Curio City spends almost exactly 14 cents per dollar on postage, but I’m treating it as another zero for this expense breakdown.

$0.119 goes to advertising. It would be nice if sales rose and fell predictably with advertising outlays, but they do not. This line item is chronically over budget, and cutting it without harming sales is an ongoing challenge -- I’d like it to run under 10%. Google AdWords gets about three quarters of this money, with Microsoft AdSense taking the rest.

Debt payments are another potential budget-buster that varies according to each company's circumstances. I started Curio City with my own money and then grew it slowly from its own revenues (called "bootstrapping"). Being debt-free is obviously good from a cash flow standpoint -- and remember from my previous post that cash flow miscalculations are the most frequent cause of business failure. Loan payments are non-negotiable costs that (along with rent) often kill companies whose revenues don't meet expectations. I could easily invest $10,000 or $15,000 in improvements (a website redesign, new merchandise, and some contracted marketing services) that would probably kick sales up by five or 10 percent. I could borrow that much from the credit cards that cover my operating expenses. But if the additional revenue that I project doesn't materialize, or if sales fizzle from uncontrollable circumstances like another global recession, I'd have a new monthly demand on my already-fragile cash flow. Being a debt-averse person by nature, I've kept debt to zero. The tradeoff for staying debt-free, of course, is lack of capital for expansion. Most companies borrow enough money to reach their expected potential all at once. The impact of debt service on their balance sheets depends on how much they borrowed as a percentage of their income. Listing it here, after advertising, is arbitrary, but probably accurate for most small businesses.     

 
$0.063 goes into discounting – markdowns, coupons, quantity discounts, and Customer Rewards. This is one cost over which I have almost complete control. 

Bricks-and-mortar retailers have to budget 2-5% to cover shoplifting and damages (“shrink”). That’s another expense that e-tailers escape almost entirely. The lost and damaged shipments that impart a small amount of shrink fit within "miscellaneous".

$0.042 goes to PayPal, Google Checkout, and credit card processing. Large enterprises pay lower rates, and the largest of all do their own in-house payment processing. But for the small players, bankers take a cut right off the top of every dollar.

 
That leaves $0.055 to cover everything else – office supplies, shipping supplies, licenses, taxes and fees, professional services, Internet access, telephone, etc. Last year those miscellaneous expenses ate up $0.013, leaving 4.2 cents for profit. An S Corporation’s profit is owned entirely by its shareholders, who pay the income taxes on it. As the sole shareholder, I pay myself 75% of it as a year-end bonus and let the company keep the rest, but I have to pay taxes on the whole thing.

 
To summarize, one dollar breaks down like this:

•    0.495 to vendors
•    0.232 to me and the government
•    0.119 to marketing, mostly Google
•    0.057 to discounts
•    0.042 to banks
•    0.013 for miscellaneous
•    0.042 for profit (shareholders, a.k.a. me)

Ending 2011...Initializing 2012

I promise that this will be my last boring numbers post for awhile. My year-end profit-taking was based on these stats as of mid-afternoon on 12/31. Being only slightly different from what I posted last week, they’re just for my own reference. You’re invited to skip down to the forecasting part.

Excel says that I beat LY’s net sales by 4.41%. The year came in $3,100 below plan.

Quickbooks says:

December: 

Total income: +0.6%
Total COGS: +4.2%
Payroll: +11.3%
Net Income (Profit): -3.2%

2011 Total:

Total income: +2.3%
Total COGS: +2.5%
Payroll: +2%
Net Income (Profit): -4.8%

My profit was $2,950 (down from $3,100 LY). I withdrew 20.3% for income taxes, or $600. Of the remaining $2,350, I pocketed the traditional 75%, or $1,750 (plus $600 for taxes = $2,350). 

My salary was $12,718. My total 2011 compensation (salary + gross profit) was $15,668. That’s $509 below LY’s $16,177. My high water mark was $16,737 in 2009. 

Advertising was the killer, up a whopping 27% (or $1,700) over LY. Advertising is now running at more than 11% of gross vs. a budgeted 9.5%. Reducing that expense will be hard when competitors keep bidding up my keywords; I’ve already surrendered Page One placement on a lot of words. I was still getting 200-250 visitors a day last week at a cost of $25-30…which would be marvelous if they were dutifully spending the expected $250-300. They weren’t. In fact, most days this week were in double digits.

This is going to take some finesse. For now, I’m just cutting my bids by a few cents a day, but that’s potentially self-defeating. This year I’m going to add another line to my monthly numbers reports: Advertising Spend.

So…how’s 2012 look? 

What economists like to call “headwinds” doomed 2011’s planned double-digit increase from the start. First, USPS’s rate restructuring broke my shipping tables for three days. Mochahost’s always-marginal service gradually deteriorated into no service at all by May. After a promising start, Hostgator shut me down twice due to “excessive” server use (meaning they run overloaded servers). I lost at least $1,000 worth of business to substandard hosting before I finally came to roost at MDD Hosting. I can’t recommend MDD highly enough. If you need reliable, affordable shared hosting with excellent support, use my affiliate link to sign up today. Curio City has not suffered any measurable downtime since mid July.

There was no engine to fight these headwinds. I didn’t have any major new products or any lucky marketing or media events to drive sales, and the economy was stuck in neutral for the first 10 months of the year. I only eked out my 4.41% gain because the American consumer rallied in November and December (and Quickbooks, as we see above, says I only gained 2.3%).

This year I’m planning a 7.5% increase – nearly double last year’s gain, but I believe it’s achievable for five reasons. First, I don’t foresee major technical problems (not that I foresaw them last year, either, but never mind that). Second, I expect a slowly strengthening economy and more confident consumers unless tea party Republicans successfully torpedo the economy or the Republican presidential candidate ruins consumer confidence. Third, I have a whole year to find a killer new product or line. Fourth, I can’t possibly get less free publicity than the one failed media mention that I had last year, so there’s nowhere to go but up from there. And fifth, the percentages don’t involve a lot of dollars. LY’s year-over-year increase was just $2,750. This year I’m looking for $4,850. A $2,100 increase in my increase isn’t trivial, but we aren’t dealing with megabucks here. Two or three big B2B sales, or one major hit product, would do it.

To motivate myself, I will raise my salary from 20% of net sales to 20.1% if Excel says that I am ahead by 7.5% in July, and to 20.2% if I make the year. 

Next week I’ll mull over some specific goals. Right now I have grunt work to tackle. I really ought to trash out my office. I’d like to rearrange the cellar to condense some boxes and make some room. I need to issue my W-2. I should place some reorders and small new-product orders with Valentines Day in mind – I’m holding off because tax deposits and payroll have already reduced Curio City’s checking balance from over $10,000 to just $5,100; with $4,900 worth of credit card bills already in front of me, I have to wait until the next statement period starts on the 12th. But if I hold off too long, I’ll miss Valentines Day (not that that holiday has ever shown me any love).

The Incredible Shrinking Profit

I got my tax return back, so here’s a little statistical trivia: At the end of last year I estimated my annual profit at $3,760. The actual final bottom line was $3,256. The return is much too complex to understand the $500 discrepancy between my guess and reality, and Schedule K-1 has a couple of little adjustments that bring my share down to $3,192. The bad news is that my total compensation for 2010 was only $15,609, not the $16,177 that I had thought. The good news is that I set aside a little more for taxes than I’ll really need. The bad news is that the $2,800 that I took out was really 86% of my profit, not the 75% that I meant to take; the $350 difference explains why my company is having so much trouble making ends meet right now.

Well, that plus the sales collapse.

February is running way below half of LY after recording the worst week since last July. My expectations were low this month, but not that low. Traffic is within normal parameters. My conversion percentage is slowly recovering from the burst of low-quality visits that I bought from Facebook. The average order value has slipped below $37 ($45 is normal). Sales this week averaged $47 per day, vs. $175 needed for success. I’d almost rather have no business at all than these little nuisance sales.

Next week’s monthly sales report is going to be grim.

The consolation for making no money is having ample time. This morning a test drive unexpectedly turned into the full-blown ordeal of buying a new Honda Fit. I’m finally just sitting down to Curio City at 3 pm. The consequences of missing most of a day? None, apart from trading our whole savings account for a new car.

I’m going to give my Parcel Post experiment one more week before I blame this slump on eliminating those cheap rates. My latest thinking goes like this: If I reinstate Parcel Post, I will again have to pay more than I collect to ship some of my larger orders (because I always ship Priority Mail). But suppose that I raise my handling fee 20 cents instead of cutting it by 10 cents, as I did last week. People placing larger orders won’t notice the 30-cent difference if they’re offered the cheapest rate class again. The real impact will be on low-end First Class orders. Because they’re more numerous, they should make up for the lost margin on bigger orders.

I like the idea of the small sales subsidizing the bigger ones. I’m just not sure yet that shipping costs are the root of my current problem.

If I Only Had the Stones

Week 6 finished at 91% of LY. Not bad. It would’ve topped LY had it not been for the 2009’s Boston Gift Guide stroke of luck. I only foresee setting one new record this year, but it's a doozy. Here are some milestones from Google Analytics and my accounting spreadsheet.

• Most visits in one day was 2,012 on 12/8/08 (New York Times gift guide mention); this year, 514 on 12/8.
• Most sales in one day was 51 on 12/9/09; this year, 39.
• Biggest day ever was $2,168.69 on 12/9/08; this year, $2,099.65 on 2/1 (two huge cap sales on one day).
• Biggest week ever was $6,344 on 12/13/08; this week is going to top $5,000. It ain’t $6,300, but ain’t bad.
• Best 2-week paycheck ever is the one I’ll collect next Friday: $1,900 and still counting. That’s almost as much as I used to make with a real job! Previous record was $1,692.39 on 12/27/08.

Week 7 – the last week of Christmas – opened with the month staggering along at 75% of LY. I feared that Christmas had already died when I had only three paltry sales before I left for Sunday’s 5 pm grocery run…then a rush on Whisky Stones pushed the day to 22 sales, including a few juicy orders for Panther caps (why do these things always happen in clusters?). Being low on stones and with the calendar running down, I killed my Facebook ad and placed a hail-Mary reorder…only to learn on Monday morning that the manufacturer was out. You’d think there’d be enough stone in Vermont, but apparently not. I shipped my last nine Recycled Motherboard Christmas Trees – the product that drove those 2008 records -- to Italy Monday morning.

Monday brought 32 whisky-fueled sales. Tuesday was this year’s high water mark with 39. Where were all these people during Weeks 5 and 6, when I expected them? I gradually lost control of my business and started making dumb (but so far minor) packing and shipping errors as I scrambled to beat the post office’s 5 pm daily close. I stopped answering the telephone entirely and spent many hours in our dark, cold, dungeon-like stone cellar. Wednesday started out downright sedate. And then lighted caps rallied unexpectedly for 25 healthy sales. Sweet.

Financially speaking, it's a good thing I didn't kill myself when it seemed prudent. The week made up all of last week’s shortfall and put a sizable dent in Week 5’s disaster. With 50 more stones I could have recovered completely. Quickbooks, whose word trumps Excel’s, says that sales are currently within a few hundred dollars of LY, so the official numbers I’ll report at the end of the month won’t look nearly as dire as my more useful planning numbers do. Although the Seven Weeks of Christmas are effectively over, sales should remain elevated until Presidents Day, and we’re down to where fewer dollars can change the year-to-year comparisons.



The mouth-breathing knuckle draggers came out this week, too. You know who they are: The customers who overpay for the slowest and least reliable shipping method (UPS Ground), send two frantic emails at 2 AM asking when their order will arrive…and mistype their email address so that I can’t reply. Or they are looking for an order that they never actually completed because the internet is just too complicated (“I’m checking on an order I placed last week to be billed later” Yeah, right…how did you do that exactly?). Or they want to phone in their credit card number and make me place their order because it’s too scary to do it themselves. Or they want pick it up locally and get pissed when I won’t let them come to the house to save $3.

Yeah, those people. I know this is indiscrete – I genuinely appreciate my customers and I am unfailingly polite to them -- but I can’t resist sharing this message from somebody who bought a $10 business card holder:

ATTENTION PLEASE! I am purchasing this as a Christmas gift for a prominent leader in science/academia. Overall, I have been impressed with the reviews but there was a review that I found on amazon regarding this particular product that I found VERY DISTURBING. He had said that the latches did not work and that it was an inconvenience just to open and shut because it would not open properly and would not close properly. He went onto say that the gold latches and such did not appear as nice like the one with the silver latches he had seen from another picture. I think it was because the gold was not bright in color but rather discolored. PLEASE DO CHECK ALL THE LATCHES FOR EASE OF OPENING AND CLOSING AND FOR NICE GOLD LATCHES AND SUCH. Also for SYMMETRY in the apperance of the case outside and inside. The person I am purchasing this for has a Type A personality and is very particular, QUITE PARTICULAR. I believe in customers' reviews and it seems like you take great pride in showing highlighted reviews of highly satisfied customers. Sincerely, xxxxx, PhD Candidate

I talked her off the ledge and assured her that she would get her $10 worth. Don’t take this the wrong way; it’s a great little item that’s sold nearly 600 pieces...but how much can you expect of something that Chinese slaves stamp out by the millions? I genuinely hope that her Curio City purchase will raise this PhD candidate’s status in the eyes of her Type A eminence.

Rant over. Thank you, I feel better now. Venting like this is one of the perks of being self-employed. Yes I’m an asshole, but you can’t fire me!

Beyond the Great Recession

Stats and spreadsheets are my favorite part of running a business. (I’m a manager, not an entrepreneur.) If you're not of similar mind, you might want to skip this post.

Here’s a fun one: In November and December I shipped 705 (44.7%) of the year’s 1,575 orders. December alone had 457 sales, or 29% of the year. Compare that to 64 sales in the entire month of July.

Thirty-one of those December customers subscribed to my newsletter. After tossing out the three Comcast addresses (because Comcrap blocks Constant Contact), that leaves 28 likely repeat customers.

I awarded myself my annual bonus. When I did my ciphering on Wednesday, the tentative bottom-line profit was $5,900. As planned, I took 75% of that and let Kraken keep the rest. My payout was $4,425; the other $1,475 boosts retained earnings (i.e., cumulative losses) from an all-time low of (-$12,243) to (-$9,478). Federal income tax on my $4,425 is about $885 and the state gets $295, leaving me $3,245 free and clear. I took my money as a loan payment rather than a shareholder distribution. (I went into great detail about this a couple of years ago, and I trust that it’s still valid.) The company now owes its shareholders (me) just $20,275 of the $28,500 that I originally put in.

Thanks for all your hard work, Ken, here’s your big juicy bonus. Get out there and stimulate the economy! Hah! I don’t dare to spend anything until Anne gets a job. I threw $1,000 at her consumer debt -- $500 to principle and $500 to cover interest payments for the next few months -- making only a tiny dent in the staggering total, but at least it's something. The remaining $2,245 went into my personal savings. In the above-linked post I mentioned wanting to replace my five-year-old gaming computer. That machine’s now seven years old, and I still want to replace it.

Moving big piles of money between accounts was fun. When the dust settles I should have $500 left in Kraken’s checking after all current obligations are met. I also stashed $4,000 in a new savings account for a cash reserve beyond ordinary operating costs. I do like having money in the bank.


Here are the numbers for this dreadful December. The month finished $1,500 below LY and a truly painful $4,500 below plan.

Total income: -8.8%
Total COGS: -7.2%
Payroll: -20.5%
Net Income (Profit): +18.9%

The raw “final” 2009 numbers:

Total income: +12.7%
Total COGS: +9.8%
Payroll: +20.4%
Net Income (Profit): +3.1%

So December wiped out half of my previous YTD 25% sales increase. More money went into my paycheck at the expense of the company’s profit (but both end up in my pocket anyway). The ultimate bottom line – dollars in my pocket – rose by 13.4% (from $14,758 to $16,737). 2009 ended $6,700 over LY but $5,000 under plan. I’m $34,000 behind my cumulative plan since 2006. “Plan,” of course, is just a number I pull out of my ass. I could just move the target. But that would be cheating.

Despite the weak finish, I’m content with 12.7% growth during the worst year of the Great Recession. Planning a 15% increase in 2010 still seems reasonable if the economy doesn’t crumble again when the government stops plumping it up. I aim to earn a smooth $20,000 in 2010.

The first sale of the new year was transaction #4,500, and it uncovered an inventory error (fortunately Excel and QuickBooks were wrong, and I had the merchandise). The second sale is going to London. International sales are 50% of my business at the moment – rather ironic in light of what I wrote last week.


Last item: A customer named gigi took the time to write: “love your emails. … you guys take a lot of time to make your content fun!” Aw, shucks. Thanks Gigi! I’m tickled to know that at least one reader enjoys my newsletters.

Achieving the Minimum

In December 2008 I set a record of 49 sales in one day. Last Friday that record fell when those precious Whisky Stones pushed me to 51 sales. I sold all 60 pieces in 18 hours…without advertising! The local store featured in the Boston Globe gift guide must have run out within hours, and then all the frustrated people went online and found me via natural search, which is really heartening. I could have sold hundreds more if I'd had the stock. Ordinarily the sales tax drives Massholes away from my site, but last weekend brought numerous in-state sales. The big day had 461 visitors and a phenomenal 10% conversion rate. 47 people came directly to my URL without any referral.

Week 6 of the Six Weeks of Christmas is within striking distance of LY’s sales. At the moment, the Six Weeks together are exactly $17.86 behind LY. There are still two weeks to go in December, and some pent-up demand for Power Caps, so there’s a chance I’ll still pull the month out of the fire. For some odd reason traffic peaked at 581 visitors on Tuesday, when I had only 14 sales.

My optimism about a general economic recovery has soured as our household finances continue their slow slide from dire to desperate. I reduced my 2010 growth plan from 30% to 15%...and that still feels over-optimistic, at least for the first half of the year.

I earned about $10,800 in salary this year. Hitting five figures is a big psychological milestone. Kraken Enterprises should finish with a profit of roughly $6,200 (down from $7,400 LY), which is distributed to me and taxed on our personal return. (I’ll actually withdraw about $4,500, cashflow permitting, and reinvest the rest in the company). My total compensation this year will be around $17,000, vs. $16,400 in 2008. A fulltime worker earning the $8 Massachusetts minimum wage grosses $16,640. So I have finally achieved my longstanding goal of earning minimum wage – I actually earn more working for myself than I could earn working for somebody else. Wow.

We fell into the 15% federal tax bracket this year and Massachusetts takes 5% more, so taxes will take $1,200 of my $4,500 payout. If I really make my planned 15% sales increase in 2010, I could hit $20,000 in salary plus bonus next year. Since my salary and the company’s profit are almost the same thing, I’m raising payroll from 19% to 19.5% of gross effective in January. (The money paid from profits isn’t subject to Social Security or Medicare taxes, but I need more cash up front).

Just for perspective…I made $70,000 in the software industry one year during the Clinton boom, before George Bush and 9/11. Anne earned even more. It’s hard to remember that we were rich as recently as eight years ago. That was a completely different world.


Something new to hate: Facebook! The Facebook widget to your right pissed me off. While I was fixing the broken Tweeter widget directly below it I noticed that my FB feed had stopped updating. I figured out that they had changed the URL. I fixed that and the widget worked again…until Dec. 8. Grrrr. I need followers, and that’s my best way of getting some. They finally fixed it on Dec. 16.

Hey, here’s a new reason to hate QuickBooks!

We are writing to let you know about a Sales Tax Report issue related to the December 1, 2009 Release 9 (R9) of QuickBooks 2009. If you downloaded R9 earlier this month, the Sales Tax Liability and Sales Tax Revenue reports are not displaying the correct data in some cases. Specifically, this issue applies to you only if you meet the following conditions: within QuickBooks the sum total of items in your Items List multiplied by the nubmer of vendors in your Vendor List equals more than 10,000.

Naturally, the Item List doesn’t tell you how many entries it contains or explain what a "nubmer" is. If it includes inactive items, mine must be in the vicinity of 1,000...and I certainly have more than 10 vendors. I reckon I should be glad they found and patched it before I filed my tax return. But...there's a bug in the patch, too, and now they're scrambling to produce R11 before the end of the year.

The QuickBooks Crisis Ends. I Hope.

You’d think that setting up my first new computer in four years would be fun, but business machines are so boring that I didn’t even take my new Vorlon out of the box for three days. Then I spent two days installing and customizing programs and utilities, leaving Wednesday open to deal with Quickbooks.

I started at 11:30 am. Basic installation was routine. Thanks to the warnings that I’d read, I knew enough to patch the program before converting my company file. By 12:05 pm I was ready to register – aw, CRAP! – by telephone. Even though I knew it was coming, enduring a sales pitch from India to obtain a six-digit code pissed me off -- can't computers do that nowadays? By 12:25 I was finally up and running. My 65 MB company file runs great on this shiny new computer. With the QB hurdle finally cleared and only a few minor details remaining, I moved my old Inspiron aside and put the Vorlon in its place of honor. I held a little ceremony. It was emotional.

Thursday morning the QB shortcut was missing from my desktop and from the Programs list. In fact, the QB executable was gone without a trace! The program folder was there. My company file was where QB wanted me to put it. But the program itself is nowhere to be found, not even in the recycle bin. WTF? How is it even possible? I reinstalled, and thankfully didn’t have to reactivate the program. The .exe survived the night and is running normally. Today QB asked me to reapply the big R7 patch, so if that’s what ate the .exe last time I might not be out of the woods yet.

I tried to set up the online banking feature that everyone was complaining about. It seemed to work once, but crapped out on me this morning. Maybe I just don't understand how it's supposed to work. It doesn't matter.

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I’ve been using Kosh long enough to pronounce a verdict on the Dell Vostro 1520. The glossy plastic lid is a fingerprint magnet, although it looks sleek when it’s clean. The onboard speakers are weak and tinny compared to my Inspiron’s robust sound. The screen is very bright and has great contrast, but (like most LCDs these days) it leaks backlight around the edges, and both of the bottom corners are shadowy. Worst of all, it doesn’t have any rear USB ports, and the side ports are near the front of the machine – convenient for changing out USB devices, but anything plugged in permanently (such as the cord for my wireless mouse receiver) is inevitably in the way. My machine is supposed to have 3 GB of RAM. Windows system info shows 2.99 GB of memory. Yet a little freeware system monitor that I installed is only reporting 2 gig. I choose to fault the utility. Functionally, the Vorlon is a great little machine so far. The real test will be how well it runs Fall from Heaven 2.

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I finally made good on my repeated threats to shut down Yahoo Search Marketing. Since July is doomed anyway, why watch the remaining $78 in my account slowly dribble away? I can always reactivate my campaigns when consumers start consuming again…maybe in the fall.

Readers who don’t care about numbers should skip down to the next section break.

I’ve spent $682.35 on YSM year-to-date. That bought 4716 clicks (14.5 cents/click) and 42 conversions ($16.25 per conversion). I’d need a programmer to implement Yahoo’s sales tracking code to know what those conversions were worth; I arbitrarily set their value at $20 – the price of one lighted cap -- which would be $840 in revenue. Am I really paying $16.25 for $20 worth of business? No, the numbers are more slippery than that. A “conversion” means one advertised item sold (thus a conversion can bring along piggyback dollars). Even conversion tracking itself is inexact – for example, Yahoo reports something called “assists”, which seem to be an ill-defined way of inflating their conversion count. Buyers who have cookies turned off don’t register at all. Even if each Yahoo conversion is really worth my average sale (currently $42, but falling rapidly), that’s still just $1,764 in gross sales. With advertising budgeted at 9% of gross, the $682.35 that I spent would need to return somewhere around $7,000 (I don’t know how to calculate that, how embarrassing) to be cost-effective.

It looks to me like I spent 39% of my Yahoo sales revenue on Yahoo advertising, which is to say that each Yahoo ad dollar brought in $1.61 in sales (is that right?). So the roughly $100 per month that I save on YSM should only reduce sales by $161/month.

I might improve this by completely revamping my ad campaigns, or possibly by cutting out all keywords except a dozen or so proven winners. Perhaps I’ll set myself a goal: By September, I want to reopen YSM with a stripped down, cost-effective campaign.

For comparison’s sake, here are my equivalent Google numbers: $1,718.68 bought 152 conversions, for $11.31 per conversion. If those 152 conversions were worth $42 each (the number I awarded to Yahoo), then I spent 27% of gross to drive $6,384 in sales. The same warnings about imprecision apply – if my overall advertising percentage was really that high I’d have gone under years ago.

No matter how you slice and dice it, Google ads are a better investment. I’m going to nudge my Google budget up by the $100 that I’m saving on Yahoo. Theoretically, spending that $100 on Google should drive $173 in sales, or $12 more than if I’d spent it at Yahoo. Whee!

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Traffic and sales are both plummeting now. By the end of June I was down to barely 100 visits per day – 50% below where I should be. This first week of July was even worse. Remember how I said that last week was the worst of 2009? Well, this week is going to be the worst since 2007. My next paycheck will be the smallest I’ve seen in two years. It’s breathtaking how rapidly things fell apart.

My next big project will be figuring out how to use Twitter and Facebook for marketing. Yes, I’m getting desperate. The gods know I have enough time on my hands these days.

Into the Stratosphere

Everything comes down to December. The month started well. Sunday hit 13 sales (my record is 19) and traffic surpassed 300 visitors for the first time this year. On “Cyber Monday” traffic rose to 336 even while transactions fell to 6. Tuesday brought no sales at all through noon – maybe because the stock market dropped 600 points on Monday? Then it came back in the afternoon to finish strong.

I spent Wednesday morning in the dentist’s chair, and then struggled to catch up for the rest of the day. Visits surpassed 400. That afternoon a New York Times editor called to tell me that they are featuring one of my products in their holiday gift guide. I only had 21 of my original 24 recycled motherboard Christmas trees in stock. They were gone by 10 am Thursday morning.

There are not enough superlatives to describe Thursday. I had 49 sales (previous record was 19, remember?). Google counted 2,012 visits; I had thought 400 was a lot. The day’s dollars surpassed my monthly totals in February, April, and August – I did a month’s worth of business in one day. This week (with most of two days left) beat April and August combined – two months worth of sales in one week.

Yes, it’s a silly product, but such is the power of the media. I’m taking notification requests for the 288 more that are now on order; some could arrive as soon as today, but more probably on Monday and Tuesday. An astonishing 89 people have joined my notification list, many asking for three or four pieces. I’m running out of merchandise, boxes, packing material…everything. Shoppers are stripping me of even my oldest, most moribund merchandise. I am having trouble keeping up.

Ironically, the New York Times was not among the 50-or-so newspapers that we targeted with our email marketing last month, nor was this product among those that I tried to promote. It really was a random lightning strike.

I aspire to earn the minimum wage someday. Earlier this year I got my average pay consistently up to about two bucks an hour, but that still makes the Massachusetts $8 minimum wage seem like a distant pipe dream. Well, for the two weeks ended 11/22, I earned $9.84 per hour. Thanks to the New York Times, my next paycheck is already at $15 per hour and still growing. $20 per hour isn't out of the question. It’s been many years since I’ve earned that kind of money. I can even pay the dentist!

Earning a living without an employer, working alone and from my home -- in my pajamas! – must describe some kind of new American dream. Especially for an undereducated, unskilled person like myself.

Now my thoughts turn to the annual shareholder distribution. How big will Curio City’s profit be this year? How much of that will exist as cash on hand? How much of it will I pay myself? (Answer to the last question: As much as possible! I must cover the 25% income tax burden at the bare minimum, and I hope that I can buy my wife a lavish Christmas present, too. OTOH, I need to make sure the business has enough cash to cover its tax payments and charge bills, with enough left over to pay my CPA for tax prep, too. I am spending money like a madman this week to service the traffic I'm getting.)

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November ended a little weaker than I had hoped and dragged down my annual numbers. December is obviously going to pump them back up again. Here are the numbers for November:

• Total income: +53.9%
• COGS: +74.3%
• Gross profit: +38.8
• Payroll: +60%
• All expenses: +95.3%
• Net income (profit): (-38.9%)

Same numbers for YTD:

• Total income: +69.8%
• COGS: +70.2%
• Gross profit: +69.5%
• Payroll: +88%
• All expenses: +57.5%
• Net income: +97.7%

As you can probably imagine, I need to get back to work pronto.

Where Are Y'All From?

Where Are You People?

Courtesy of Google Analytics, here’s where 14,257 people came from so far this year.

• Search engines: 71.5%
• Google pay-per-click: 30%
• Yahoo (both PPC and organic): 18.5%
• Google organic: 14.5%
• MSN organic 4.5%
• Referring sites (links): 21%
• search.ebay.com
• rs6.net (say what?)
• turnkeywebtools.com (Sunshop’s tech board)
• clothing.listings.ebay.com (say what?)
• radgames.com (the Monopoly Super Add-On)
• dogpile.com (say what?)
• octopus overlords.com (now defunct, once my favorite haunt)
• airandaqua.com (a reciprocal link)
• amazon.com (say what?)
• zombiegames.com (obviously for Zombie Fluxx)
• Direct traffic: 7%

I need to take yet another hard look at the PPC campaigns that drive between a third and a half of my business. Sales are up nicely this year, but so are advertising costs. (See the end of this post).

My blog doesn’t show up until #15. My “new” message boards, Gaming Trend and Popehat, are #27 and #44. But I’ve only been posting there since OO died, so they will probably rise.

Purely for trivia’s sake…my best day so far this year was May 6, with 153 visitors. The low point was March 29, with only 60.

Once a month, I upload a file to Google Base (formerly Froogle). Their online report shows a lot of clicks on various items, but I don’t know where one finds Google Base listings or how those visits are aggregated into the numbers I gave above. Google Base doesn’t cost anything, so I take it on faith that it’s making some mysterious contribution.

This post was inspired by the question of where, geographically, my customers are located. How this question arose shall remain secret for now. I had a hunch that certain cities in New Mexico, Colorado, and California were delivering a disproportionate amount of business. So I went at my database from several different directions.

First I looked at all of my 1,525 customer accounts. No single zip code is home to more than three account holders. The most popular zip codes are:

• 95648 Lincoln CA (3 users)
• 95401 Santa Rosa CA (3 users)
• 90266 Manhattan CA (3)
• 78664 Round Rock TX (3)
• 62249 Highland IL (3)
• 60187 Wheaton IL (3)
• 60068 Park Ridge IL (3)
• 49503 Grand Rapids MI (3, including family and friends)
• 48439 Grand Blanc MI (3)
• 33496 Boca Raton FL (3)
• 22124 Oakton VA (3)
• 22003 Annandale VA (3)

Then I looked at shipments. In terms of the number of boxes sent, the most popular zip codes were:

• Grand Rapids, MI (8, includes family and friends)
• Boca Raton, FL (6)
• Grand Blanc, MI (5)
• Lincoln, CA (5)
• Abingdon, MD (5)
• Burlington, VT (5)

It would’ve been interesting to run a comparison based on dollars, rather than account holders and shipments. But even my patience for number-crunching is finite. Combining those two zip code lists yields these top five:

1. 49503 Grand Rapids, MI
2. 33496 Boca Raton, FL
3. 95648 Lincoln, CA
4. 48439 Grand Blanc, MI
5. 22003 Annandale, VA

Because most cities have many zip codes, I also looked at city names. Here are the top 10 cities for Curio City accounts:

• Chicago, IL (15)
• New York, NY (12)
• Brooklyn, NY (10)
• Dallas, TX (9)
• Silver Spring, MD (8)
• Grand Rapids, MI (8)
• Los Angeles, CA (8)
• Wash DC (8)
• Portland, OR (8)
• Houston, TX (8)

If I had the knowledge and patience to combine suburbs and exurbs with their parent cities, the list would change. But no matter how you slice it, my hunch about New Mexico, Colorado, and California did not pan out. Are you disappointed that your community didn't make this list? Don't despair! Just place a few orders, and get your neighbors to do the same. ;)

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More reason to hate Yahoo: After receiving another email about keywords going inactive, I deleted 10 of the 12 affected phrases...all of them from campaigns that I deleted ages ago anyway. WTF? Thanks, Yahoo! A few days later I got a report of 30 more words whose minimum bids now exceed my offer. I deleted half of them, raised the ones that only rose by a few cents, and let a couple go idle (in case the minimum drifts back down someday). From May 1-22 I paid $87.74 for 718 clicks that yielded a whopping four conversions. Yes, four. My Yahoo results went downhill dramatically after their last upgrade/stealth price hike. I really ought to shut it down completely, at least until Microsoft buys them. Nobody in their right mind would pay 40-50 cents per click for these keywords. They must be deliberately trying to make small advertisers drop out.

More reason to hate Google: Google Checkout is still undercharging for UPS shipping two full weeks after they acknowledged the bug that I reported. I have now lost at least $25 to shipping undercharges, versus the $9 that they have saved me in payment processing fees. Every single GC customer is choosing UPS. That makes me suspect that the old parcel post bug returned to GC after the USPS rate hike (just as it did in Sunshop). I can’t generate GC test transactions without setting up a complicated way around their prohibition on selling things to myself. And why am I the only merchant in America doing QA for Google, anyway? GC is supposed to be saving me money. Instead it’s costing me money, time, and aggravation. Get it together, Google.

Finally, the monthly sales wrapup: May was phenomenal. I credit the economic stimulus checks that everybody’s receiving. Sales more than doubled LY, and I blew my plan out of the water. YTD total income is up 97.8% over LY. Gross profit is up 105.7%. Payroll (that’s me!) is up 93%. The bottom line profit is up 388.4%! As always, I must remind you that the actual dollars involved remain small. But I could not ask for a better trend. My chronic open-to-buy hole is down to three figures again; I can reorder some lighted caps before they run out. My buying strategy for the rest of this year is to replenish stock when absolutely necessary, and bring in new merchandise only when I can do it without deepening the OTB hole. I hope to claw my way back up to zero in time for the Christmas season.

June will be a lot more challenging.

Coming Attractions:

• Running with the Big Dogs
• The Zombie Store
• Legal Extortion